ACQUISITION

We account for acquisitions under the provisions of Accounting Standards Committee (ASC) Topic 805 - “Business Combinations.”

On February 3, 2015, we successfully completed the acquisition of Family Security Holdings, LLC and its two wholly-owned subsidiaries. The purchase price for FSH and its subsidiaries consisted of an initial purchase price of $12,994,000 in common stock and contingent consideration based on a percentage of gross written premiums written on the renewal of FSH policies during the one year period following the closing date, which we estimated to be $540,000 as of December 31, 2015. The contingent consideration will be paid in shares of our common stock one year after the closing of the merger.

The business combination has been accounted for using the acquisition method of accounting, which requires, among other things, that most assets acquired, liabilities assumed and earn-out consideration be recognized at their fair values as of the acquisition date.

The purchase price consisted of the following amounts:



Fair market value of common stock issued	$	12,994
Estimate of potential contingent consideration⁽¹⁾	540
Total purchase price	$	13,534

⁽¹⁾

The amount of the contingent consideration reflected in the table above reflects our estimate, as of December 31, 2015, of the amount of contingent consideration that we will be required to pay to the former shareholders of FSH pursuant to the purchase agreement to acquire FSH and its subsidiaries. The contingent consideration will be paid out in additional shares of our stock based on the 180 day average of the closing price of our stock in the 180 days immediately prior to the one year anniversary of the closing of the acquisition. The contingent consideration will be measured at each reporting date with changes in its fair value recognized in our Consolidated Statements of Comprehensive Income.

The operations of FSH and its subsidiaries are included in our Consolidated Statements of Comprehensive Income effective February 3, 2015. We had one year from the acquisition date to finalize the allocation of the purchase price of FSH and its subsidiaries. The final purchase price allocation is as follows:



Cash	$	14,467
Investments	5,588
Premium and agents' receivable	1,496
Intangible assets	6,312
Goodwill	3,413
Other assets	609
Loss reserves	(2,390		)
Unearned premiums	(9,646		)
Reinsurance payable	(998		)
Loans payable	(2,246		)
Deferred taxes	(1,399		)
Other liabilities	(1,672		)
Total purchase price	$	13,534

The unaudited pro forma financial information has been prepared as if the FSH acquisition had taken place on January 1, 2015. The unaudited pro forma information is not necessarily indicative of the results that we would have achieved had the transaction taken place on January 1, 2015, and the unaudited pro forma information does not purport to be indicative of future financial operating results.



	For the Year Ended December 31, 2015
			Pro Forma
	As Reported		Adjustments		Pro Forma
Revenues	$	357,569	$	1,127	$	358,696

Net income	$	27,358	$	77	$	27,435

Diluted earnings per share	$	1.28	$	—	$	1.28